SOHAIL SARFRAZ

ISLAMABAD: The Federal Board of Revenue has increased sales tax to 3 percent on industrial inputs under SRO.1125(I)2011, which deals with special regime for five export-oriented sectors including textile.

The FBR issued notification 486(I)/2015 dated July 1, 2015 to simplify the special regime for five export oriented sectors, as well as the sales tax on industrial inputs provided in table-1 of the notification 1125(I)/2011 has been increased to 3 percent. In SRO 1125(I)/2011, concessionary rate of 2 percent, 3 percent and 5 percent were applicable to five export-oriented sectors, namely, textile leather, carpet, surgical and sports goods. The rate of 2 percent is being enhanced to 3 percent. The said notification is also being revamped and simplified without disturbing the existing provisions (except withdrawal of reduced rate on maize starch) to facilitate the registered persons as well as field officers. Value addition tax on commercial imports of these sectors @ 2 percent is being reduced to 1 percent.

Arshad Shehzad, renowned tax expert, while commenting on amending provision in five export-oriented sectors, informed that though rate of sales tax on industrial inputs has been increased, the FBR has otherwise streamlined the scheme to great extent. He informed rate of sales tax value addition on commercial importers are cut down to extent of 1%. Likewise, reduced rate suppliers were given exclusion from payment of minimum sales tax @ 10 percent under section 8-B of the Sales Tax Act, 1990 through corresponding amendment in SRO 492(I)/2015.

He further informed that FBR in another rationalizing measure allows sales tax refund on monthly basis against reduced rate of supplies in terms of notification 1125(i)/2011 through introduction of corresponding amendment in sales tax rule 33 and rule 34 vide notification 494(i)/2015. Earlier, they were entitled to seek refunds after expiry of one year. He said the bunch of currents amendments removes unnecessary anomalies from this special scheme for five export-oriented sectors.

However on the flip side Arshad Shehzad suggested sub condition 1(III) and 1(IV) provided in table-II of the amending notification requires further rationalization. He said supplies of industrial input to registered or unregistered person within five export sector are chargeable to sales tax @ 3 percent. In his opinion the condition requires to be restricted to the extent of registered persons only, the supplies to unregistered person in the absence of any mandatory provision of providing CNIC, NTN and other particulars, could not be identified or classified to be sold to person within or outside five sectors. He informed no similar condition/restriction is placed against entries at Serial 2 and 3 of the same notification, Therefore in his opinion condition at entry # 1(III) and 1(IV) also requires to be relaxed suitably. The notification otherwise brought simplification and removed certain anomalies, he concluded.